Joint Venture Principles in Practice

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Presentation transcript:

Joint Venture Principles in Practice Alan Gough Watford Borough Council Gareth Lewis Watford Community Housing Trust

Joint Venture “A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance.” Wikipedia

Partnership “A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests.” Wikipedia

Initial Drivers Existing strategic relationship Recognition of the political landscape Increasing homelessness and out of borough placements Need for immediate action

Why the J-V? Shared objectives to: Primarily to enhance the quantity of affordable housing Increase housing supply of all tenures Generate income to support core objectives Recognition of the potential contributions of each Formalise the principle of a long-term relationship Not project specific

Potential Contributions Political and Board drive to achieve Adjacent assets producing a “marriage value” Funding through on-lending Development delivery skills Essential back-office support

Structure (1) Hours in darkened rooms with lawyers and tax accountants Protect regulatory positions – use of subsidiaries Ensure parity of risk and reward Maximise tax advantages

Structure (2) Two Companies Hart Homes (Watford) Ltd (RentCo) Holds all rental property Holds shared ownership property Hart Homes (Watford) Development LLP (SaleLLP) Develops for market sale Develops on behalf of RentCo Why two companies?

Company Structure – Hart Homes (Watford) Ltd Watford Borough Council Watford Community Housing Trust Clarendon Living Ltd Hart Homes (Watford) Limited

Structure – Hart Homes (Watford) Development LLP Watford Borough Council Watford Community Housing Trust Watford CommercialServices Ltd Clarendon Living Ltd Hart Homes (Watford) Development Limited Liability Partnership

Governance Partnership – equally shared risks and rewards RentCo – 2 Directors from each SaleLLP – 2 Corporate Representatives from each Chair Rotates annually – no casting vote Council Cabinet and Clarendon Living Ltd Board have oversight

Why it works! Shared agenda Open and frank dialogue Willingness to work at it Mutual respect Honesty

Outputs First Council/Trust Board papers January 2016 Companies registered January 2017 First project to site February 2017 40-bed Temporary Accommodation facility 36 flats for affordable rent

Outputs (cont.) Second project in design - 80 homes all tenures Shared trust enabled scheme design/tender/commencement at risk WBC able to trade commercially through WCS

Lessons Learnt Invest the time to work together on principles and detail Recognise the need (and cost!) of specialist advice – many pitfalls! Do not underestimate the time needed for set up – particularly bank accounts Robustly test the business case for the J-V Ensure consensus and equality of understanding Welcome challenge!